The Perfect Storm
March 30, 2023
Basketball Nerds (planetbasketball.de) – Edyoucore German Article Translated
Year after year, the NBA turns a handful of basketball players into multi-millionaires. At least on paper. Because the sad reality is that the millions are slipping through the hands of many players – in some cases straight to bankruptcy. The story of a perfect storm and the search for the causes.
NBA PLAYER’s are many things: sometimes an exceptional athlete, sometimes a role model, sometimes an advertising icon. Prima donna sometimes, team player often enough. But one thing they are all without exception: survivors. Because NBA players are “the last men standing” in a merciless cut-throat competition. Each of them stands on the remains of 10,000 other professional careers.
Beneath the sneakers, the unfulfilled dreams of all those high school talents and college high achievers who didn’t make it crack and crack with every step. Only 47 out of 541,000, or 0.009 percent of all high school athletes who play basketball, mathematically make it into the NBA.
Those who get there continue to live by the laws of the jungle – fighting for another year in the league, a few more minutes, even more throws, even more responsibility. The chance to really get stuck in the NBA is equal to that Chance of winning the lottery. The price for this is high: diligence, dedication, time, sweat, tears. Week-long trips away from home, missed children’s birthday parties and Christmas parties. Injuries, operations, rehabilitation, consequential damage. Trades, moves, long- distance relationships, new schools. The reward for all this? Fame, glory… and millions upon millions of dollars.
The average annual salary in the NBA, as of today, is $9.6 million. More money than ever before as more and more financial resources are poured into the system every year for decades.
Salaries have grown as well, eight percent on average, because 51 percent of the so-called “Basketball Related Income” (BRI) is paid out to the players. Unimaginable sums that could turn the lives of several generations upside down for this lucky 0.009 percent. Especially when the first contract is followed by the second or even one of those epochal 100 or 200 million deals that the stars and superstars of the league are allowed to sign.
The average NBA career lasts just under five years, so for today’s generation there is an average of almost millions together. 2000 generation players still averaged 20 or 25 million. The ultimate American dream, “from rags to riches,” is tangible when imagining how those chosen ones could see a seven, eight, or even nine figure sum in their bank account after the end of their career. If it were like that…
BROKE 2009 appeared in “Sports Illustrated,” an article that blasted the beautiful story of NBA athletes’ financial rise to soapy water. “How (and why) athletes go broke” was the headline in the venerable sports magazine, describing a “financial pandemic” that left many athletes penniless at the end of their careers.
“60 percent of NBA pros are broke five years after retiring,” the magazine reported. The article sent shockwaves through the league60 percent – a number that is so unbelievable that it is still quoted today when it comes to the fate of insolvent professional basketball players. So does the ESPN documentary Broke, a 2012 oral history in which several bankrupt ex-athletes retell their journeys to bankruptcy and lists a handful of former NBA players – Kenny Anderson, Rick Ma- horn, Randy Brown, Jason Caffey, Derrick Coleman or Rumeal Robinson. “That 60 percent is ridiculous Personal bankruptcies, if they exist at all, are extremely rare,” replies Chysa Chin.
The former Nike executive is Executive Vice President of Strategic commitment of the NBPA players’ union and is considered the good soul of many NBA professionals. As such, she has also accompanied players through financially difficult times. Her colleague Ron Klempner, General Counsel of the NBPA, seconded: “Our players are a microcosm of society. They are no different from steelworkers or policemen. Some are very well read in financial matters. Others don’t. We try to pick them up where they are. Of course we have problems, we have tragic cases, but these are just that: tragic.” Even Drew Hawkins, founder of Edyoucore, the players financially who wants to impart basic knowledge thinks 60 percent are wrong. But: “Financial bankruptcy is still a significantly big problem.
Many players struggle with financial worries during their playing days, even more so after the end of their careers. A lot of players are embarrassed and keep their stories to themselves.”
In 2017, after 23 years as a financial advisor, Hawkins founded his company, which has since been hired by teams or sports leagues to advise players. Hawkins remembers which athlete’s fate made him think about it at the time: that of Antoine Walker.
If a multi-year career in the NBA is a five-in-a-row, then Antoine Walker actually landed a straight six: the multi-talented forward won an NCAA championship with the Kentucky Wildcats in 1996, and the Boston Celtics drafted him that same summer sixth place.
Two years later, Paul Pierce joined the team, who was to form a congenial duo with Walker for five years. The Celtics have not been without controversy, thanks in no small part to Walker.
And yet: In 2002, the Celtics duo failed in their very first playoff appearance until the finals of the Eastern Conference. In 2003, Walker was traded to Dallas. After further positions in Atlanta, Miami and Minnesota, he ended his career after twelve years – as a three-time All Star, member of the All-Rookie Team 1996/97 and NBA Champion with the Miami Heat 2006 (where he was 38 minutes per game and as his team’s third-best scorer in the playoffs played a major role in winning the title). Walker had earned 108 million dollars in his career and also pocketed a few million from Adidas, for which he advertised at the beginning of his career as “Employee Number 8” in the “Real Deal” model. But just two years later, Forward filed for personal bankruptcy. More than 108 million, fizzled out in 14 years? How?
THE PERFECT STORM
If you ask any financial adviser, player representative, or ex-player, you’ll eventually understand the “perfect storm” that a new generation of NBA rookies sees year after year swallowed. Most of them are young – 18, 19, 20 years old – and in no way prepared for their new lives off the court.
“It’s like becoming CEO of a company before you’re ready,” says ex-NBA player Jamal Mashburn. The step into the league is the result of years or decades in the tunnel – without looking left or right, completely focused on their basketball craft. A significant proportion of the players grew up in rather disadvantaged circumstances without a financially secure background. They don’t have time for financial education either – because after their way into the league they now have to defend their place in one of the 30 teams.
During presentations, Hawkins likes to show a number collected by Edyoucore: On average, NBA players invest 1,400 hours a year in their skills, fitness, nutrition and the games themselves, 30 hours in their other development … and one hour per year year for their own finances. Many never look at their payslips, at the “financial statements” of their accountants, agents or financial advisers. What for? You’re finally rich now.
“Other people in such specialized professions feel the same way. Doctors and lawyers also invest a lot of time into exactly one skill. They too have their challenges when they suddenly earn a lot of money. You may make the same mistakes. But they can practice their profession for 30, 40, 50 years. NBA players don’t have that luxury,” Hawkins said. And so mistakes can no longer be corrected when the NBA career is suddenly over. “Saying no…you don’t learn that until you sign your second contract and realize you’ve completely spent your first,” says NBA veteran Jalen Rose. But not every player gets the chance to get healthy with the second contract.
The problem starts with the basics: Not every newcomer realizes that the $20 million rookie deal isn’t actually going to net $20 million. The Federal Income Tax at the top rate, which is levied by almost all US states, is 37 percent, plus in most states there is a State Income Tax of between four and 15 percent. For gamblers in highly taxed California, wealth is cut in half immediately. A maximum of four percent of the player’s salary goes to the agent (in the case of advertising deals it can also be ten to twenty percent). Depending on the state, the 20 million dollars over three years are only worth a good nine million. Which of course is still an unbelievable sum. So how on earth do you lose three million dollars a year?
LIFESTYLE OF THE RICH AND FAMOUS
Shaquille O’Neal remembers the day he signed his first NBA contract. It was 1992 when a then 20-year-old O’Neal signed his rookie contract with the Orlando Magic. “I spent a million dollars in about 45 minutes,” he says. First the $150,000 Benz for himself, then the same car for his father and the smaller $100,000 variant for his mother. After that, Shaq paid off the loan on his mother’s house and then did “what all people do…buy rings and diamonds and earrings and stuff like that.” little
days later, O’Neal was down $60,000.
Stories like this abound – enough to fill half the pages of this issue. Not only did Gilbert Arenas buy a $3.5 million mansion, but he set aside $6,500 a month for Shark Budget to maintain his home’s large shark tank and feed his sharks. He later bought a $60,000 toy train set for his children.
Nets forward Ben Simmons bought two Savannah cats for $10,000 from his first big payday — “a silly buy,” as he puts it today. “They were acting like crazy.” In 2010, ex- Maverick Marquis Daniels invested an undisclosed sum in a 14-karat gold and cognac diamond necklace in the shape of his own head. Kenny Anderson – once one of the hottest point guards in the NBA bought eight cars and several houses and made headlines during the 1998/99 NBA lockout when he complained that he had to sell some of his cars as a result of the players’ strike.
Antoine Walker also had a soft spot for wheels, including a $400,000 Maybach. Latrell Sprewell bought a yacht and Stephon Marbury bought his own private jet for an alleged $45 million plus maintenance costs running into the millions. Scottie Pippen’s purchase of his own plane for 4.3 million looks cheap in comparison – only stupid that his Gulfstream, which was not inspected before the purchase, could no longer fly and required another million in repairs.
Not to mention the expenses at the roulette or poker table that many professionals and ex-professionals on the Search for a little thrill. Michael Jordan is just the most prominent example of the widespread vice, Allen Iverson is said to have carried paper bags full of cash into the casino. NBA legend Charles Barkley believes he has lost $30 million through gambling over the course of his life – although his very own risk assessment could play a role: “Gambling is a fifty-fifty chance: you can either win or lose.”
It’s easy to laugh at these examples. But what “normal” twenty-year-old dutifully puts his salary on the high edge for hard times? And which supposedly serious adults wouldn’t lose their grip if a $40 million lottery win hit the account?
The lavish lifestyle of many NBA players is fueled by the lack of financial education and the luxurious vibe in the NBA ecosystem: teams provide chartered jets and luxury hotels for away trips. Furnishings, food and equipment are the finest. Your account balance seems endless, teammates and coaches appear in expensive cars and fine clothes – and so many players fall into the trap of outbidding each other in a lavish lifestyle. on the Traveling away involves playing cards for large sums, in the strip club you alternately raining down bills on the dancing staff, competing with cars, jewelry and wardrobe for alpha status in the team.
It becomes particularly dangerous when young players with shallower pockets feel they have to keep up with the superstar on the team. A 2016 study by Personal Capital found that the average NBA player spends $42,500 a month on luxury products, gadgets, healthy food and cars, almost half of that at the plus-size fashion retailer Express.
Seven years later, higher sums are certainly being moved. As Patrick Ewing once put it when he wanted to put the high salaries of the players into perspective: “We earn a lot. But we also spend a lot!”
Whether “making it rain” or the expensive cart – the high expenses tear a hole in the wallet. Financially more expensive, however, are those expenses that repeatedly cause further costs – even if the salary payments, which are worth millions, have long since been paid stay away For example, long-term loans for real estate or luxury cars. In addition, it is not only your own lifestyle that is persistently gnawing at your account balance.
SHARK, TRAILERS AND FAMILY
At the latest when signing the first professional contract, NBA professionals are magically attracted to all those elements that can have a devastating effect on their finances – and unfortunately many of them come from the family or friends of the players. What begins with an expensive car and a paid-off house for mom doesn’t end there. Kenny Anderson, for example, regularly pinned friends and family members a few thousand dollars too. “You suddenly have relatives you’ve never heard of,” says Jalen Rose. Many players feel compelled to generously share the new wealth – some even maintain additional apartments or houses for family members who want to support them. They entrust old acquaintances with tasks as agents, business managers or consultants for which they are not qualified.
Then there are the so-called entourage – those cliques of friends, family members and acquaintances who have served as a support system over the years and in return generously participate in the expensive lifestyle of the nouveau riche athletes.
“There’s nothing wrong with helping out friends and family,” says Antoine Walker. “But if you don’t say no in time, they can dry up the well. At some point you have to add this word to your vocabulary.”
In extreme cases, friends or family will even take their very personal “lottery ticket” on purpose. As with Erick Strickland, to whom a friend suggested an undervalued property in 2001to buy. Strickland’s financial adviser was his father, who took a rather superficial look at the investment and gave it a thumbs up. The three-million investment turned out to be overpriced – and Strickland’s friend secretly pocketed a commission.
But not only friends and family hold out their hands: even supposedly professional financial advisors or agents can turn out to be fraudulent. Just like Charles Banks, once Tim Duncan’s financial advisor: the financial expert repeatedly advised his clients to invest in projects from which he himself benefited and which later failed. Duncan invested $20 million in this way – Banks pled guilty to a payment of $6 million in which he had persuaded Duncan to pay his own debts. “Fortunately, I’ve had a long career and made good money,” Duncan later said, in his usual understatement. “It was a lot, but it’s not going to change anything in my life.”
The same thing happened to Kareem Abdul-Jabbar in the 1980s: the superstar had already given his agent Tom Collins far-reaching advice in 1980 given powers of attorney. In 1986, he sued Collins for allegedly embezzling $59 million by deferring tax returns, arbitrarily making bad investments, and transferring funds from Abdul- Jabbar’s accounts to his other players. In 1989 there was an agreement, the details of which were not made public.
There is not always fraudulent intent behind the investments that make NBA players lose money. It is often well-meaning acquaintances or friends who turn to the NBA professionals with their world-class ideas. And too often the money sits loose because the idea of financing a revolutionary invention, of owning your own club, restaurant or record label is far more enticing than the five to six percent return on a balanced investment portfolio. “You have friends with the best business idea ever that will make you both rich – and all that idea needs is your money,” says Jalen Rose. “And if you want to lose money quickly, I have three ideas for you: record label, restaurant, clothing label.”
Unfortunately, the devil is in the details. Junior Bridgeman made a $600 million fortune from his modest earnings as a pro in the ’70s and ’80s to date. Among other things, he invested in restaurants, more precisely: in over 100 Wendy’s branches – but before that he had learned the trade from scratch in the offseason as a Wendy’s employee.
Shaquille O’Neal also gained additional wealth with a series of fast-food outlets, which finances his extravagant lifestyle to this day. Shaq’s recipe for success? Every new deal has to be approved by several consultants and lawyers. Even a single objection is enough to slow down the deal. A system that Hawkins’ company Edyoucore also recommends – in addition to sticking to a budget, putting together a competent team of consultants makes the difference.
“It takes a long time to go broke by buying Ferraris,” says Darius Miles, who was once part of the bling-bling generation in L.A. and Cleveland and later also went bankrupt. “What quickly ruins you are bad business deals.” In Miles’ case, it was several real estate deals that contributed to his personal bankruptcy – including a joint deal with NFL running back Marshall Faulk and rapper Nelly, who made several multimillions -Dollar processes ended.
WHERE LOVE FALLS
Perhaps the most painful way of losing money is also the most tragic: divorce. “The proportion of marriage contracts among professional athletes is significantly lower compared to non-athletes with the same income,” says the well-known divorce attorney Raoul Felder, who represented the ex-wives of Patrick Ewing and Jason Kidd, among others. As a result, a divorce usually means that half of the property is divided between the spouses. A sensitive low blow for own finances, which is why center Dikembe Mutombo also insisted on a marriage contract in 1994 when he wanted to get married. However, his fiancee refused to sign shortly before the wedding. “She never signed and Mutombo didn’t marry her,” recalls his agent David Falk. Too bad for the 500 guests, some of whom were already on their way from the Congo.
Meanwhile, many professional athletes marry their college or high school partners— women they feel confident aren’t with them just for financial reasons. Marriage contracts are rare in this constellation. On the other hand, the pressure on the relationship is great when the suddenly famous players are being swarmed by attractive women everywhere. Extramarital missteps are not only tragic, but also expensive.
However, divorces are widespread, especially after the end of a career. “There’s this sudden change in lifestyle,” says ex-pro Mark West, now vice president of player programs. “Suddenly you’re always at home with your wife and she gets on each other’s nerves. Before that you could always say that you have to go to training now.
Now you don’t have to go anywhere. Now you have to finish the conversation.”
It becomes particularly difficult and costly when children are involved. Numerous insolvent ex-professionals cite high alimony payments as the reason for their financial problems – especially when the high salaries no longer come one day. Not every player then thinks of fighting for a reduction in payments in court. It becomes doubly problematic if several alimony payments are made at the same time. As with the numerous examples from the NBA universe that have long since degenerated into stair jokes: Shawn Kemp, who is known to have at least seven children with six wives. Or Jason Caffey, who has ten children by eight women.
It can go that fast. A few years in the league, then the divorce, a little depression, a few years of self-medication. Taxes and agents ate the first half of the salary, several hundred thousand dollars a year went to the big cars, the expensive apartment, the good life, half of the rest went to the divorce. After the end of his career, the money flows into the installment for the apartment, maintenance, to the dealer in the neighborhood … how close is the step into private bankruptcy for the average Joe as soon as this one clever real estate deal suddenly looks less clever?
The NBPA does not collect statistics on the actual rate of ex-players going bust. But she recognized early on that she had a problem with the financial security of her players. In the early 1990s, on the way to the lockout in 1998/99, it was first noticed that there was a need to catch up, Klempner recalls. For the first time since the days of modest salaries and summer jobs, the usual salaries were not paid for months due to negotiations between player representatives and team owners. It was only then that many professionals realized how close they were to financial collapse. Since then, the players’ union – in the tradition of its founders, the 1964 used the first televised All-Star Game to secure several demands, including a pension for former players – creating what is arguably the most comprehensive package of protections available in the US job market. The so-called “401k plan” is such a program: players can pay in part of their salary like “normal” employees, which the
NBA “matches” with the maximum permitted rate of 140 percent of the amount paid in. The amount saved is invested according to taste, and the money can be accessed from the age of 59. The program is “opt out”. This means that every player takes part unless they actively withdraw their participation.
In addition, ex-players age 50 and older receive a pension of $1,000 per month for each year in the NBA—a program recently expanded at the instigation of active NBA players, the founding fathers of the league to enable a better livelihood. In order to bridge the years immediately after the end of one’s career, the “Post Career Income Plan” has been in existence for a short time, for which one percent of the basketball-related income is set aside and invested. From the age of 30, ex- professionals can receive monthly payments. And after ex-NBA players had to suffer from huge hospital costs as a result of their professional careers, eating up their savings, NBA retirees have had health insurance since 2017. There are also programs that finance the continuation of their university courses or other training.
The NBPA also organizes various lectures at the big talent camps and as part of the “rookie orientation” in order to prepare the young talents for the many challenges and predetermined breaking points through their unexpected wealth. (One focus of the NBPA that we also want to mention here: the consideration of doping regulations in order to avoid a lengthy, costly ban.) Several teams also work together with companies such as Edyoucore. And indeed: The average NBA player today seems to be a little better prepared for being an overnight millionaire.
CJ McCollum of the New Orleans Pelicans recalled the Portland Trail Blazers in his suicide note of that one watch that he really wanted as a young player. “$3,000 but I was so paranoid that going broke, going in and out of the business over and over again. Next time, next time. Dame (Lillard) said: ‘Buy yourself the damn watch, you’re in the NBA!’ I said, ‘I don’t want to end up in some E:60 documentary!’” McCollum saved the $130 per day for two months that players receive when traveling away from home. and thus paid for half the clock.
Klay Thompson received a kind of monthly budget from his (NBA-proven) parents when he was a rookie (whereby he managed his own money). Michael Carter- Williams made a living from just a handful of endorsement deals early in his career, while his rookie contract was placed in a trust fund he wasn’t allowed to touch until years later.
During his time with the Warriors, Kevin Durant actively used his access to tech multimillionaires and team owners to improve his expertise and get new investment ideas. New Laker Mo Bamba visited as a college student, he attended the nerdy “Sloan Conference” at his own expense in order to better understand the statistical side of the NBA and to educate himself in this way. There are many examples of active professionals avoiding unnecessary spending, investing in their education, and avoiding all the other common pitfalls.
And yet the outlook remains bleak. Despite all positive examples: The tragic stories about bankrupt players are not a thing of the past. “I’m in the cabins regularly. I hear the questions that are being asked,” says Drew Hawkins with a serious expression. He employs players like Antoine Walker, Greg Oden or Jumaine Jones as guest speakers to shake up the pros. And he believes teams, the league and even the NBPA could do even more than they have done so far. “I think the system needs to improve. I love what my company does, we don’t have a lot of competition. But we really shouldn’t exist. The problems should have been solved a long time ago.” Until then, it looks like the perfect storm will form year after year.
Jumaine Jones was drafted 27th overall in 1999 and played eight years in the NBA. Until 2007 he earned almost ten million dollars – and went broke.
This is his story, in his words.
Getting drafted was the happiest day of my life. But he became
worst day. Because I wasn’t prepared for what was coming. It turned into a nightmare almost overnight with calls from all the people wanting my help. I was 19, grew up poor and come from a large family. And everyone wanted something.
When I was little, we never left our neighborhood. I grew up 15 minutes from the space shuttle – we’ve never been there. I was surrounded by crime. My grandmother sold drugs. All of her children sold drugs for her. Half of my family never finished high school. I couldn’t wait for school to be over, for me to be like her.
When I was 13, I witnessed a murder: we were playing a video game. One guy won, started talking. The other didn’t like it, went out the door – and shot him. After that my mother sent me to her sister in Georgia. That was the best thing that ever happened to me.
When I signed my first contract, I was making $650,000. I thought I could never spend that much money. I knew nothing about taxes. I bought my mother and my sister a house each. And a car think aunt I grew up with complained why she hadn’t gotten anything. So I wired her $5,000 a month. I thought that’s how you do it.
After four years in the league, my wife looked through our finances and told me we were broke.
It took four years to get out of these problems. When my career ended, I was back to square one. But I had to pay $7,500 a month in child support for my son. I didn’t know I could have gotten alimony reduction after I retired.
I played international basketball, transferred $1,000 a month, but the debt kept adding up. Eventually my passport was confiscated. I could not anymore
play pro because I couldn’t travel. I got depressed. Smoked and drank every day. I went to therapy and eventually understood the burden I had to carry through my childhood. I ended up having to for 18 months
to jail for my alimony debt.
Today, Jumaine Jones lectures on financial education for Edyoucore. He is committed to mental health, especially among ex-professionals. And he has written a book tracing his wild journey. It’s called
“Last Man Standing”.